US immigration reforms can be a passport to failure for IT firms like TCS, Wipro and Infosys

BANGALORE: The planned overhaul of America's immigration system is giving the jitters to Indian software services companies, and raising concerns that it could have severe repercussions for Indo-US economic ties.

If the US ends up using H1-B visas to inflict pain on companies such as Tata Consultancy Services, Infosys and Wipro, it could attract retaliatory measures from the Indian government, which will not want to be seen as timid in defending the interests of a vital sector, analysts said.

Indian companies fear that the draft immigration bill, which will be unveiled on Tuesday, will contain provisions making it onerous for Indian companies dependent on H1-B visas to send professionals on assignments to the US. Although there is no guarantee that something like this will happen, Indian firms are extremely nervous because of media reports on the issue in the US as well as the track record of the Barack Obama administration.

"Free movement of skilled professionals for temporary work is a trade-related matter and should not be linked to immigration. It is important that trade relations between India and the US align to the long-term strategic agenda that supports growth in both markets," JS Satyanarayana, secretary, department of electronics and information technology, said.

The bill being drafted by a group of eight senior senators could make it much harder for Indian companies to obtain H1-B visas. It could also make it costlier by mandating higher wage levels for employees on H1-B visas that Indian companies send on assignments. This, the National Association of Software and Services Companies (Nasscom) said, will be a deliberate attack on India-based firms.

"The language appears to be clearly discriminatory in nature, specifically targeted at Indian IT companies and putting them at a competitive disadvantage against their US-based competitors," said Som Mittal, president of Nasscom, which represents the $108-billion ( 5.9 lakh crore) Indian IT industry. India exported software worth $46 billion to the US in 2012-13.

If the fears are borne out, they will form part of a pattern of American actions designed to hurt Indian IT companies, responsible in a large part for transforming India's image globally as an important economic player.

Visa fees have been doubled to fund border security along Mexico, and Indian workers seeking short-term postings in the US are being denied visas at higher rates than before.

Although no one will admit it openly, industry officials are of the view that the US could be responding to what it perceives as Indian actions detrimental to the interests of American corporations. Tax demands on US companies could have contributed to the negative sentiment against India. Moreover, American firms have been loudly protesting against what they say are measures by India favouring procurement of electronic goods from domestic manufacturers.Â "The Indian government has been chasing MNC tech companies here with tax bills, and that is the feedback they give to law makers in the US," said a senior industry executive who has in the past been involved in negotiations on behalf of the Indian IT industry. "I'm being told that these are retaliatory measures that we are seeing playing out."

Executives from the top three IT services companies declined comment.

The immigration bill, if it becomes law, could make recovery harder for Indian IT companies that have been reporting slower sales growth and declining margins as their clients in the US and Europe reduce technology spending in response to negative macroeconomic conditions. The sector, which grew about 17% in the 2012 financial year, slowed to 10% in 2012-13 and is projected to grow 12-14% in the ongoing fiscal.

"I have long argued that India's primary resource is its human capital, and the Indian government should ensure that in any bilateral trade agreement, the easy movement of human capital is an agenda item," said Phaneesh Murthy, chief executive officer of iGate. "We focus on opening up markets for goods and services both ways, but not movement of people."

Merchandise trade between India and the US totalled $63 billion in 2012, according to the US Census Bureau. Nirupama Rao, India's ambassador to the US, cautioned lawmakers against restrictive policies in an article published on Sunday in the USA Today newspaper.

"Without these visa holders, US businesses and consumers would not benefit from the services they have come to rely on. Jobs would not be created and, in fact, could go elsewhere, including overseas." Commerce Minister Anand Sharma did not reply to emails or text messages.